Monthly Economic ReportExecutive Summary( May 2019 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is recovering at a moderate pace while weakness in exports and industrial production continues.
- Private consumption is picking up.
- Business investment is on the increase at a moderate pace, while weakness is seen recently in machinery investment.
- Exports are in a weak tone.
- Industrial production is in a weak tone recently.
- Corporate profits improvement appears to be pausing, although they remain at a high level. Firms' judgment on current business conditions shows cautiousness, mainly among manufactures.
- The employment situation is improving steadily.
- Consumer prices are rising moderately in recent months.
Concerning short-term prospects, weakness remains for the time being, but the economy is expected to continue recovering, supported by the effects of the policies, while employment and income situation is improving. However, further attention should be given to the effects of situations over trade issues on the world economy, while the prospect of the Chinese economy, the uncertainty of situations and policies in overseas economies and the effects of fluctuations in the financial and capital markets also need attention.
(Policy stance)
The Government will make its utmost efforts to ensure the economy overcomes deflation and achieve economic revitalization and fiscal consolidation simultaneously, in addition to make effort toward the reconstruction and revitalization from the Great East Japan Earthquake and the restoration and reconstruction from the 2016 Kumamoto Earthquake.
To this end, the Government steadily implements the "Basic Policies for Economic and Fiscal Management and Reform 2018", the "Growth Strategy 2018" and so on. Moreover, in order to establish the social security system oriented to all generations under which people of all generations can live at ease and work, the Government will promote comprehensive reform of the system including the labor system. Futhermore, looking ahead to the consumption tax rate hike planned for October 1, 2019, the Government will take all possible measures towards economic and fiscal management.
The Government will implement the FY2018 first and second supplementary budget and the FY2019 budget including the temporal and special measures swiftly and steadily.
The Government continuously pursues to expand the economic virtuous cycles which cover local areas, SMEs and small-scale businesses, through directing growing corporate profits towards investment, wage increase and further improvement in the employment situation.
The Government expects the Bank of Japan to achieve the price stability target of two percent in light of economic activity and prices.
Detailed explanations
1. Demand trends such as consumption and investment
Real GDP (gross domestic product) in the January-March quarter of 2019 increased by 0.5% on a quarterly basis (at an annual rate of 2.1%), posting positive growth for the second consecutive quarter. Nominal GDP increased by 0.8% on a quarterly basis, posting positive growth for the second consecutive quarter.
Private consumption is picking up.
Private consumption is picking up. Real wage income of employees is increasing moderately. Consumer confidence is in a weak tone.
The Synthetic Consumption Index, which synthesizes demand-side statistics (Family Income and Expenditure Survey, etc.) and supply-side statistics (Indices of Industrial Producer's Shipments, etc.), decreased by 0.0% in March from the previous month.
Concerning short-term prospects, consumption is expected to continue to pick up, supported by the improvement in the employment and income situations.
Business investment is on the increase at a moderate pace, while weakness is seen recently in machinery investment.
Business investment is on the increase at a moderate pace, while weakness is seen recently in machinery investment. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey) show that business investment increased in the October-December quarter of 2018 by 3.3% from the previous quarter. By industry, business investment increased for manufacturers by 8.8% from the previous quarter and increased for non-manufacturers by 0.2%. Capital Goods Shipments and Imports, supply-side statistics, have shown some weak movements recently.
According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (March survey), planned business investment for all industries in fiscal year 2018 is expected to increase. Planned business investment for fiscal year 2019 is also expected to increase. In Tankan, firms' judgment on production capacity indicates their sense of shortage. The figures for Orders Received for Machinery, a leading indicator, have been in a weak tone recently.
As for short-term prospects, business investment is expected to increase at a moderate pace, mainly reflecting a high level of corporate profits and actions in growth sectors and such.
Housing construction is almost flat.
Housing construction is almost flat.Construction of owned houses is picking up. Construction of houses for rent is moderately decreasing. Construction of houses for sale is almost flat. Total number of sales of condominiums in the Tokyo metropolitan area is almost flat.
As for short-term prospects, housing construction is expected to remain flat for the time being.
Public investment has shown a steady undertone recently.
Public investment has shown a steady undertone recently. The amount of public construction completed in March decreased by 0.9% from the previous month, the amount of contracted public works in April decreased by 1.0% from the previous month, and the amount of public works orders received in March increased by 13.1% from the previous month.
As for short-term prospects, public investment is expected to show steady movement due to the execution of related budgets.
Exports are in a weak tone. Imports are almost flat. The balance of goods and services is in approximate equilibrium.
Exports are in a weak tone. By region, exports to Asia and other regions are in a weak tone. Exports to the U.S are picking up. Exports to EU are almost flat. As for short-term prospects, exports are expected to pick up, mainly reflecting the moderate recovery of overseas economies and such. However, attention should be given to the effects of situations over trade issues on the world economy, and the uncertainty in overseas economies including the prospect of Chinese economy.
Imports are almost flat. By region, imports from Asia and EU are almost flat. Imports from the U.S. appear to be pausing for picking up. As for short-term prospects, imports are expected to pick up.
The balance of goods and services is in approximate equilibrium.
For the goods in March, the exports value has decreased while the imports value has increased, so that the surplus has turned to deficit. The margin of the surplus in the balance of services has decreased.
2. Corporate activities and employment
Industrial production is in a weak tone recently.
Industrial production is in a weak tone recently. The Indices of Industrial Production decreased by 0.6% from the previous month in March. The Indices of Industrial Inventories increased by 1.4% from the previous month in March. The Survey of Production Forecast in Manufacturing expects an increase of 2.7% in April, and an increase of 3.6% in May.
By industry, transport equipment has a pause observed in their movements of growth. Production machinery is in a weak tone. Electronic parts and devices are on a decline recently.
As for short-term prospects, production is expected to pick up, though attention should be given to situations of the global economy, especially China.
Corporate profits improvement appears to be pausing, although they remain at a high level. Firms' judgment on current business conditions shows cautiousness, mainly among manufactures. The number of corporate bankruptcies is almost flat.
Corporate profits improvement appears to be pausing, although they remain at a high level. During the January-March quarter of 2019, the current profits of the listed companies decreased from the previous year for manufacturers and increased for non-manufacturers. According to the BOJ Tankan (March survey), in fiscal year 2019, sales are expected to increase by 1.2% in the first half of the year, and are expected to increase by 0.5% in the second half from the previous year. Current profits are expected to decrease by 3.6% in the first half and increase by 2.6% in the second half from the previous year.
Firms' judgment on current business conditions shows cautiousness, mainly among manufactures. The Tankan (March survey) revealed that firms' judgment on current business conditions deteriorated for all enterprises in all industries as that for all enterprises in the manufacturing industry deteriorated while that for all enterprises in the non-manufacturing industry was flat. Firms' judgment on future business conditions, which indicates the business condition as of June, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (April survey), current business conditions rose while prospective business conditions fell.
The number of corporate bankruptcies is almost flat.
The employment situation is improving steadily.
The employment situation is improving steadily. Meanwhile, the sense of a labor shortage is at a high level. The total unemployment rate was 2.5% in March, an increase of 0.2 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons all increased.
The number of employees is increasing moderately. The number of new job offers has been increasing recently. Active job openings to applicants ratio is almost flat. Overtime hours worked in the manufacturing industry are decreasing.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are increasing moderately.
According to the BOJ Tankan (March survey), firms' judgment on current employment conditions showed that the labor shortage remained severe.
As for short-term prospects, the employment situation is expected to improve steadily.
3. Prices and the financial market
Producer prices are rising moderately in recent months. Consumer prices are rising moderately in recent months.
Producer prices are rising moderately in recent months.
Consumer prices, in terms of general, excluding fresh food and energy, are rising moderately in recent months.
According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 87.7% in April,an increase of 1.3 percentage points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to rise moderately for the time being.
As for stock prices, after declining from the 22,200-yen level to the 21,000-yen level, the Nikkei Stock Average rose to the 21,200-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 111-yen level to the 109-yen level, moved in the direction of depreciation to the 110-yen level.